Investment Risk

Understanding Risks

There will always be the risk of fuctuations in the value of an investment. Investment risk can be managed and even minimised but it cannot be completely eliminated. It is important to understand that not all risks are foreseeable. There is always the chance that you may lose money on any investment you make.
Some common types of investment risks are outlined in the table below.

Type of risk Description
Market Risk Markets are subject to a host of factors, including economic conditions, government regulations, market sentiment, local and international political events and environmental and technological issues.
Market risk may have different impacts on each investment and investment style.
Security specific risk An investment in a company may be affected by unexpected changes in that
company’s operations (such as changes in management or loss of a big customer) and business environment.
Investing internationally will give exposure to different or potentially greater risks that are not associated with investing in Australia. International investments may be affected by political and economic uncertainties,
lower regulatory supervision, movements in foreign currency and interest rates and more volatile, less liquid markets.
Currency risk The potential for adverse movements in exchange rates to reduce the Australian dollar of an international investment.
Interest rate
Changes in interest rates can have a direct or indirect impact on the investment value and/or returns of all types of assets. Interest
rates may directly or indirectly affect a company’s cost of borrowings as well as the value of fxed interest securities.
Credit risk Credit risk refers to a risk of loss arising from the failure of a borrower or other party to a contract to meet its obligations. This may arise in derivatives, fxed interest securities and mortgage securities.
Valuation risk Where there is no liquid market for investments in the Fund, those investments may be valued by reference to market prices for other comparable assets and observable market data. These prices may
not refect the value at which the investments can be realised, which may be lower than the value refected in the unit price of the Fund.
Futures and
options risk
Some investment strategies seek to proft from derivatives, including over-the-counter derivatives for which there is no formal market. Such derivatives often experience signifcant volatility in prices and carry
counterparty risk. Where derivatives (such as futures contracts) are highly leveraged, risks may be compounded because of the nature of those derivatives.
Investors in the Fund will be exposed to counterparty risk as a consequence of the use of derivative contracts. Substantial losses could be incurred if a counterparty fails to deliver on its contractual obligations or experiences fnancial diffculties.
Derivative risk The value of derivatives is linked to the value of the underlying assets and can be highly volatile. Potential gains and losses from derivative transactions can be substantial.
Other risks
Product risk To maintain the quality and diversity of financial products, changes may be made to the Fund at any time, including:
> closing or terminating the Fund
> changing the Fund’s objective, investment strategy, asset allocation neutral position or ranges or currency strategy (if any)
> changing the rules that govern the Fund (eg. changing fees, notice periods
or withdrawing features)
> removing or adding an investment manager.
In some cases these things can be done without prior notice to investors.

You should be aware of these risks when investing and should be aware that not all risks can be foreseen.

No matter how skilled the investment managers, or however strong the Fund’s performance has been in the past, there is always a chance you could receive back less than you invested. Investment returns are volatile and can go up and down. The future performance of the Fund is not guaranteed and past performance is not a guide to future performance.

For risks related to Bonds, check the Bonds page.